Brussels- Yesterday Eurozone Finance Ministers canceled a scheduled meeting for Wednesday with Finance Ministers from 17 Euro zone member nations that was intended to approve Greece’s second bailout valued at 130 billion euros ($171 billion).
EU Finance Ministers also planned to meet with Greece’s private creditors while implementing an 100 billion euro debt write-down on their Greek bond holdings.
Greece is still faced with having to repay 14.5 billion euros in bond repayments due by March 20th.
Approving the second bailout for Greece is widely viewed as essential for Greece to avoid defaulting and exiting the euro zone.
On Sunday Greece’s Parliament passed a tougher round of austerity cuts and conditions imposed by the EU, IMF, and the EC (Troika members). In a vote of 199 to 74, Greek politicians accepted a tougher austerity plan which amounts to 3.3 billion euros in budget cuts, including a 22% cut in minimum wage salaries along with wage and pension cuts. By 2015 there will be 15, 000 public workers laid off.
EU Ministers were also seeking written guarantees from lawmakers in Athens that affirmed the EU bailout deal won’t change after elections with the emergence of a new government. Greek elections are approaching in April.
One of Greece’s political parties, New Democracy, showed reluctance to accept the tougher austerity measures and the written guarantees. New Democracy Leader Antonis Samaras has failed to pledge his support for written guarantees contained in the their stricter EU austerity package.
Greece still has 325 million of cuts needed to be found.
Jean-Claude Juncker, Prime Minister of Luxembourg, and President of the Eurogroup said that there was still missing information about how the Greek government plans to save the promised 325 million euros.
Juncker says he also did not receive assurances from the leaders of the two main Greek parties that they will implement the austerity program after elections in April. He reported that EU Finance Ministers will instead conduct a teleconference on Wednesday and meet next Monday.
In 2010 Greece received their first bailout package of 110 billion euros but the country was slow to implement austerity measures tied to the package. The Greek government has consistently broken promises and failed to follow through the 2010 EU’s austerity package.
There is a credibility issue at stake with the Greek government and the recent rioting that was shown on the airwaves last Sunday in Athens with burning buildings and looting on the street clearly did not help to assure Greek’s nervous creditors that the debt ridden country is fully prepared to handle a large bailout package from its wealthier northern European neighbors.
Junker said that Greece “must agree on austerity first.” Ahead of last Sunday’s Greek Parliament vote, Juncker insisted that there would be “no disbursement before implementation.”
Speaking before reporters, Junker explained, “We can’t live with this system while promises are repeated and repeated and repeated and implementation measures are sometimes too weak.”
Although Greek leaders admit they failed to successfully achieve their financial targets already established by Greek creditors from the first bailout package, they can point to the fact that the EU austerity cuts have led to a deepening recession and higher unemployment which is currently at 21%.
Recent Greek GDP numbers that were released yesterday from the quarter ending in 2011 (4Q) shows that Greece is entrenched in a deep recession that has lasted for over 4 years. Greece’s 4Q 2011 numbers reveals that country had a contraction of 7% compared with 4Q 2010. The Greek economy contracted 6% in 2011. Forty-eight percent of Greeks below the age of 25 are currently unemployed. Homelessness is on the rise in Greece.
Greece’s economy has problems being competitive while the Greek government has been reluctant to lay off thousands of civil servants, sell off state assets, and improve the Byzantine tax collection system which led to high levels of tax evasion in the past. In September 2011 Greek lawmakers approved a controversial new property tax that aimed to boost revenue. It remains to be seen whether the property tax is sustainable and is capable of generating enough consistent revenue to help pay down Greece’s massive debts.